KARACHI: The disbursement of microfinance loans increased almost 20 per cent on a quarterly basis to Rs134.6 billion in October-December, latest data released by the Pakistan Microfinance Network shows.

The surge in disbursements was coupled with a 7.4pc quarterly increase in the gross loan portfolio, which amounted to Rs392.6bn. On an annual basis, outstanding microfinance loans rose 21pc in 2021, data showed.

“One of the major reasons for the quarterly rise in loan disbursements was the fact that wheat sowing takes place in the last three months of every year,” said Ghazanfar Azzam, CEO of Mobilink Microfinance Bank, which is the largest provider of microloans in terms of the number of borrowers with a market share of 24.9pc.

Moreover, growth in the microfinance industry hit a snag when the pandemic hit the economy, he said. “Covid-19 led to a slowdown in disbursements. The pandemic is receding now and the industry is just getting back to its usual pace of growth,” he added.

The microfinance industry disbursed 4.7 million loans in the three-month period under review, up 5.2pc from the preceding quarter.

There were 8.1m active borrowers at the end of October-December, 0.9pc lower than the number of borrowers at the end of the preceding quarter.

The average loan size in October-December was Rs28,292, up 13.9pc from Rs24,846 in the preceding quarter, on the back of a surge in disbursements.

Mr Azzam said one of the two reasons for such a sharp rise in the average loan size is inflation. Secondly, the State Bank of Pakistan has now allowed microfinance banks to disburse small business loans of up to Rs3m. This has resulted in an increase in the average loan size during the last quarter of 2021, he said.

“Our bank has started financing tractors and other commercial vehicles, which helped elevate the loan size of the entire microfinance industry,” said the CEO of Mobilink Microfinance Bank, which is the third largest provider of microcredit in terms of the gross loan portfolio with a market share of 9.8pc.

He added that microfinance banks have now entered the housing space under the prime minister’s scheme for subsidised housing — a move that’s going to further increase the average loan size.

Published in Dawn, April 13th, 2022